Excessive flooding and government price intervention will lead to a bumper crop of rice during the current season, but the same price support that encourages farmers to produce more rice is hurting Thai exports, a leading rice trader said yesterday.

“We will have the rice for sure, but increased competition with other countries could make exports iffy iffy,” Pichai Sriprasert, head of the Thai Rice Exporters Association, said in an interview yesterday. “We would be able to retain our position as the number one rice exporter if the government kept to the market mechanism, that’s for sure. But, if the government intervenes more and more, we will lose our status. Either India or Vietnam will take us over.”

Rice farmers and traders expect a harvest of 25 to 27 million metric tons of paddy this year, about 10 percent more than last year. Despite the increased production, rice exports are expected to decline to about six to seven million tons from a record 10.13 million tons last year – even though nearly half of the country’s rice production is surplus that can be exported.

Vietnam has emerged as a leading competitor, shipping out five million tons of rice already this year. Hanoi surprised Thai authorities last week when it won a contract to supply the Philippines with nearly 350,000 tons of rice after it told the Thai government that it had sold all of its rice stock for the year.

“That indicates that Vietnam is very keen to compete with Thailand,” Pichai said. “This is the largest year ever for Vietnam’s rice exports.”Vietnam’s aggressive sales tactics have not gone unnoticed by Thai rice dealers. They accuse Vietnam of hurting farmers by selling their rice at a cheaper rate.

“It’s very difficult to maintain the number one spot in the world market, given that Vietnam has opted to sell out their rice every time they can get orders without caring much about whether the price is high or low,” said Wattana Rattanawong, president of the Thai Rice Mills Association.

But domestic efforts to control rice prices do not automatically transfer to the global market. Countries are free to sell rice at the market price – and Thailand’s rice is increasingly being priced out of the market.

“No commodity can be sold above the market price,” Pichai said. “Politicians like to say to farmers that they are helping, but they cannot sell the product.”

The government buys about nine million tons of rice per year at higher than market prices. Even so, rice exporters are still able to buy paddy at a lower price because they offer convenience. Though exporters are able to sell all of the rice they buy, the government rice sits in warehouses as officials

speculate on price rises. Sometimes it is sold back to the private sector, or used in barter deals with other countries.

Either way, farmers and traders say that offering guaranteed prices to farmers may be a way to win votes but it also hurts the competitiveness of the Thai rice sector. With an average yield of only about 1.2 tons per acre, Thailand is quickly falling behind its competitors.

“The competitiveness of the Thai farming sector is not as strong as before,” said Suwan Kathavuth, the president of the Thai Farmers Association. “Thai farmers stress quantity, not quality. Thai Hom Mali rice is not as aromatic as it was previously.”

Adding to the worries over exports is China. Officials in Beijing are reportedly close to approving a genetically modified rice strain that could dramatically improve rice yields and double the country’s annual production.

“It will be dangerous for rice exporters if China approves a GMO rice strain,” Pichai said. “We will be forced to approve GMO rice also. We will have no choice.”